tv Bloomberg Daybreak Europe Bloomberg December 14, 2016 1:00am-2:30am EST
anna: waiting for yemen. fed chair janet yellen is poised to deliver the first rate hike of the year. risks and regulation, an exclusive interview, hsbc's chairman tells bloomberg he doesn't see u.s. president-elect donald trump rolling back regulations. >> our biggest risk is our industry. where perceived as a part of the world where people are able to -- were all exposed to each so competing on who can have the lowest standards is a
bad form of ranking. anna: oh yen, high confidence. cinnamon -- sentiment improves for the first time since june last year. what does it mean for the stimulus? johnson & johnson ins discussions for a potential deal, leaving the door open for another better. reports say they are now in talks. a very warm welcome to bloomberg daybreak europe. we are here in london. i'm anna edwards. breaking news coming through on the car industry in relation to china. china is set to be planning a 7.5% small engine car pat -- car tax through 2017. china has said the plan
extending the auto sales tax incentive to 2017. china is set to set a small engine car tax at 7.5% and cars at 5%. we will see if that has any impact on european carmakers are other global car manufacturers exposed to smaller in of the car industry. let's look at the risk radar and show you where we are on this fed day of all days. expecting a decision later on from the fomc and the wide expectation market that we will see a hike. china and brexit got in the way. did u.s. politics get in the way? now the stage seems to be set for the fed to show its hand with a rate hike. what does that mean for markets? it generally has everybody pausing today. the msci asia-pacific almost flat today. we wait for that widely expected
hike from the fed. rose.tockpiles the yen is in there for you as well. pretty flat for the dollar in general this morning. the survey of manufacturers was pretty much where we expected. lifting the mood among japan's biggest manufacturers and that had been a missing ingredient in recent reports. 2.46% was the yield on the 10 year. we flirted with 2.5% earlier this week but we've come down a little bit. we will talk about that more during the program. let's get the bloomberg first word news. here is angie lau. angie: a 10 month low ahead of today's hotly anticipated federal rate decision. investors are expecting janet
yellen to deliver the first hike of the gear. meanwhile, the former fed chairman alan greenspan discussed the deflating bond bubble.auble -- >> we have a bond market bubble which is in the process of deflating. it has a way to go and will affect the outlook quite significantly. few stagflation's, there are not enough models to go on. sachs will -- gary cohen is leaving the bank to take a job in the donald trump administration. goldman is likely to name martin chavez to replace schwartz as chief financial officer. said idrisn like has
mates may climb to 3% on the tenure treasury -- interest rates may climb to 3% on the 10 year treasury next year. the chief investment officer has bondthe president elect's stance unfriendly. the benchmark treasuries are currently tracing it -- trading at less than 2.5%. proves -- yen improves prospects for company earnings. three months ago with the outlook up, but 5.5% increase in business investment for the current fiscal year was below estimates. global news 24 hours a day, powered by more than 2600 journalists in more than 120 countries. find more stories on the bloomberg.
i'm angie lau. this is bloomberg. anna: let's check in on the markets now in asia. juliet has details for us. it's fed day and you can feel it, can't you? markets not going in a very convincing direction right now. juliet: things are very muted as you said earlier at the top of the show. still seeing a lot of support coming through from oil and gas players and also telco and tech players in the region well supported. we have a slump coming through in gold and retail players under pressure as well. essentially were not seeing too much conviction from the overall regional index although australia up .7% and a week session in new zealand, down by .8%. the nikkei has closed pretty flat.
remember the nikkei is still trading at that 2016 high and it's been a fluctuating day in terms of shanghai equities. in late trade were seeing some upside on the shanghai composite. there's been a fair bit of , with then australia renewed takeover bid from macquarie group. falling in the sydney session. just quickly having a look at some of the currencies, you mentioned the dollar, fairly steady ahead of the fed decision. we're seeing a bit of upside from emergent market currencies, leaving those gains of about .3% against the greenback. anna: let's talk more about the fed. investors are -- are expecting janet yellen to deliver the central bank's rate hike of the year today. appears a foregone conclusion with markets perhaps
more keen to hear the fomc 2017 forecast in a press conference at follows the statement. outlook for fiscal policy remains a big issue. spokene lacqua exclusively with the hsbc chairman and got his view on the impact of stimulus in the united states. there are some who would argue that inflation would be a good hang. mean -- would be a good thing. that should mean interest rates would begin to rise. zero are near zero rates are very difficult for him a policy perspective because there's not so much flexibility. riskegin to get more of a car again and savers begin to see some reward for their savings. -- a risk curve again.
you can argue both sides, and economists do. our special coverage of the fed today starting at 6:00 p.m. london time. let's discuss the prospects of the u.s. economy, both monetary and fiscal. guest joins us here on set. david, great to see you here. i'm primed and ready on the bloomberg. tell me your thoughts about what the focus should be as were looking to the fed this afternoon to give us their guidance. on expectations around unemployment, or what are you looking for? see ifwe're looking to they recognize anything that has , not predicting any kind of stimulus out of the trump administration. i think they will maintain a sober tone and remind people it
nothing is actually happen. we don't know what is going to happen or to what degree. right now the previous set of dots were assuming two rate hikes next year. for the first time in a long time, the market analyst and the fed are all saying the same thing next your. we're skeptical that something else is going to happen preview you can find people inside jpmorgan who believe we will get three or four rate hikes next year. are going to get this very week first quarter of economic data? we've had five years in a row where seasonally adjusted data -- a clear pattern of weakness in the first quarter that cap the fed on hold until the middle of the year. anna: it's been fascinating to see 2016 develop in a way that , it's not what it
looked like at the end of the year. let's hold our thoughts on the fed there at a moment, david. let's get you up to date with had's happening, we've numbers breaking from the , with profitler coming in at 2.80 2 billion euros, in line with the estimate of 2.8 billion. the nine-month sales in line with the estimate at 57.9% versus 59.8% estimate. the key factors going in, how much is the push online really helping here? how much has growth in the united states ramped up and how much have discounts eroded sales?
there is the e-commerce push and credits we says that still only about 6% of sales, and also the push into the u.s. -- credit says that is still only about 6% of sales. operates across 90 countries, so were always looking for information on currency swings. the pound, the chinese renminbi, the u.s. dollar and the pay so all of that impacting. let's leave european retail for the moment and get back to our conversation with david. we were talking about what impact is trump going to have? , there's at trump conversation about inflation to be had.
this brings together all kinds of things that can push up inflation generally. with the bart chart, the price of brent crude rising here. there have been all kinds of other things even aside from trump that could influence inflation higher. >> when the key things people need to focus on is the increasing health of the financial sector -- one of the key things people need to focus on. money supply is starting to expand. both the you cast -- u.s. and the u.k. see signs of improvement. just talking about some of those is welcome news to see some of these ending globally. there's been such a huge movement and surprising on the political front. when the history books are written a few years from now, 2016 will be the year the commodity bear market ended and
emerging-market underperformance ended and the year that deflationary impulse and shock receded. significantlyill impact the investing environment going forward for the next two years. anna: you welcome the end of this deflationary influence. i've heard it elsewhere, but then we had these comments suggesting fears around a 3% yield on the u.s. 10 year. we're not there yet, we are at 2.45%. concerns about the stock market and the housing market and liquidity and corporate and junk-bond markets. would you be concerned that those -- with those levels? david: is slow compared to where it used to be in history. if they are rising because inflation is getting out of the fed's control, of course that
would be a problematic issue for a lot of markets. if it is rising because there's a healthy labor market and robust domestic growth, that is a completely different story. i think there's a lot of difference between 2.5% and 3%. question mark even with the fed hiking two or three times next year, when we get to 3% or not, and what damage it will cause. this is something we've been talking about internally. everyone assumes the housing market will be a source of strength. housing starts are still depressed, etc., but housing affordability is stretched across the nation. higher mortgage rates that you will get from the backup and bond yields just makes that problem worse. i wouldn't be surprised if housing is a little soggy next year. already you've seen a bit of tightening of financial
conditions. currencies are up, interest rates are up, nothing has happened yet. anna: we will see if we get any comments on the tightening brought about by the strength of the u.s. dollar from janet yellen later. here are some of the other highlights for your day ahead. at 9:00 a.m. london time, we get london -- italian inflation. u.s. mortgageter, applications, and still in america at 1:30 p.m. u.k. time, we get retail sales. we will bring more from that exclusive interview with hsbc's chairman douglas lit. we take a closer look at his views on the incoming administration of donald trump and the regulatory landscape. we take a look at the prospects of the nation's corporate earnings. plus 1000 miles under the sea.
anna: welcome back. a live shot of hong kong where it is currently 2:20 in the afternoon. .4%,ang seng is up by outperforming the rest of the asia-pacific markets which are fairly flat. here is a bloomberg business flash. elion is in talks with another party after johnson & johnson ended talks for a potential deal. this as the wall street journal elion is int act
talks with another company. morgan stanley has offered as much is 5.5 billion dollars u.s. ar taps group, setting up potential bidding war. the bid open the deal to other mergers. target has failed for the second time to persuade regulators that it could unwind its business without havoc on the broader financial system. the lender is banned from buying -- of wells fargo doesn't come up with an acceptable so-called living will by april, assets in its broker-dealer and non-bank units will be tapped. that is your bloomberg business flash. anna: thank you very much, juliet. hsbc chairman douglas flint help right -- help drive europe's biggest bank and if he prepares prepares to step
down, ages has much less to contend with including the u.k.'s exit from the european union and the election of donald trump. withine lacqua sat down town for an exclusive interview -- ask if wall street will if donald trump will deregulate wall street. .> that was not a good period our biggest risk is our industry. you don't want a part of the world where people are able to do things with much less capital than is economically advisable, because we are all exposed to each other. with who has the lowest standard is bad for business. what we might see is some moderation of reporting rules which are onerous in terms of so on.y, systems, and there are multiple different
ways of reporting around the world. relaxatione some -- heoker, i guess he had has a lot of things on his mind. francine: does it impact european banks and put you in a much worse position? do you think regulators in europe would look at what is happening in the u.s.? >> i don't think they should. europe has to make a decision as to what kind of an investment banking capability it wants or whether it simply wants to import the skills that exist in wall street and say that's fine, we would rather not have the risky activity, if that's the way this judge, i think that would be a mistake. one of the other issues that is particularly in the context of brexit, is that we
, andntering a world where wholesale activities, the u.s. and the european union have agreed that they are equivalent, which is important in terms of doing business in each other's markets. the u.k. is in europe, so at the moment it is equivalent. the u.k. has left europe, and over time moves away from thinkan regulation, i unlikely but possible. the u.s. could change its regulation and you've now got three systems when you had one. the fragmentation of the global framework i think would be expensive for our customers and it would be systemically riskier than bringing everything together in the way that it has been done successfully since 2008. anna: you can catch the full interview on saturday at two: 30 p.m. london time. a lot more to come throughout
the day from that interview here on bloomberg television. david is still here with us from jpmorgan asset management. there's still a lot of conversation about all trump and what it means to bank regulation. very topical for the european banking sector which still has problems so many years after the financial crisis. david: besides all this national stuff, there are discussions of just had ad they meeting in south america where they were trying to hash out exactly the kind of models they should be using to judge their risk, etc. i agree with the hsbc chairman, i don't see the banks themselves wanting to have massive to regulation. there is a question over the complexity of the regulation.
cut down the complexity of the regulations but actually raise capital, go for a simpler but more capital intensive model. we don't really know. over in europe the banking regulations there are dealing with a more fragile banking sector. from yesterday we heard moody's in terms of the outlook, talking about the losses that will erode capital, a lack of confidence because of the political uncertainty at a time when they are trying to raise capital. david: this is the result of weak and anemic growth for a number of years, a financial system that was to heavily weighted toward banks in the first place and the nonfinancial onlynies very focused hoping to get their capital. and of course the new rules which were supposed to protect the public sector balance sheets and now it's causing more
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you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. a warm welcome back to daybreak europe. his 6:30 here in london. the dollar against the yen not moving all that far right now. said day and we are waiting for the fed decision on interest rates, long anticipated and much expected that we will get a hike in interest rates little bit later on today. a new edition of daybreak is now available on your bloomberg and your mobile. let's look at some of the top stories that it made it into today's edition. the cover story is the u.s. equity rally.
the dow buoyed by optimism that an all but certain fed rate hike represents a strengthening u.s. economy. to what extent the fomc updates , more than the actual moving rate decision that has been expected for some time. one guest saying the deficit you may climb to 3% next year and it would spell the end of the bull market for bonds and punish stock and housing markets in his view. saying they will raise rates more aggressively in the years ahead. on actelionuses in
and the takeover talks that exist around that business. johnson & johnson has ended talks for a a takeover deal. -- the newspaper says it is in talks that could ion at as much as $30 billion. lots to talk about as we wait for the fed to give us the results of their deliberations. details about with moving in the markets, kind of quiet as we wait for the fed. , but let me take you to my first chart. yields sliding across global debt market including the treasury market after the boj increased. the curve flattening as well for jgb, dropping 7.5 basis points. at the moment we're at 0.79%.
the boj took this action due to the sudden rise in yields and because of concerns about further changes, according to an official. this is where have seen a lot of action. in the equity markets, it is pretty quiet. the msci asia-pacific index pre-much unchanged. energy stock some of the best performer -- the msci pretty much unchanged. materials the worst performers as well. cover a little higher on some supply concerns. investors looking ahead to the fed meeting, that is the big thing today. i wanted to look at the trade rated dollar. indexade weighted dollar is the strongest since 2002. state street says the surge may toward the potential for a more rapid tightening cycle.
higher yields all bad for gold and as the fed does gear up to tighten, we see gold trading near a 10 month low. gold prices have dropped this quarter. it's the worst performer after sugar on the bloomberg commodity index. thank you very much. let's talk about what's going on in japan. japanese corporate sentiment has improved for the first time since june of last year. confidence among large manufacturers rose to 10 from 63 months ago. the results bolstered by a fall in the yen which weakened against the dollar by the most since 1995 last month. francine lacqua spoke exclusively with hsbc chairman douglas flint and asked him what worries he has about china. is, in anue in china
economy of that size and complexity, can you make a position change from a heavy industry infrastructure investment led export led driven,to a consumer technology savvy research and development economy swiftly? the transition is underway. big steps have been taken. heavy restructuring is under way. the population is supporting the transition. that is reflected in political support. but it is a massive undertaking to transition the economy. but you can see that the research side, the consumer side, the tech side is going very strongly. in the chinese firms have -- are beginning to invest in lower wage economies in the same way
that other businesses used to invest in china. they're going into vietnam, myanmar, into africa, and effectively replicating the stage of development that they went through in other countries and building infrastructure to create trade flows. you're trying to do something , but china has managed it extraordinarily successfully so far. you can see what they report, many think there may be other elements in the investment companies that are yet to be recognized. , think it is less relevant managing them impairment is really about can you manage it in a smooth way without causing disruption.
china has not borrowed heavily from the rest of the world, so it is an internal issue. can you manage it without causing disruption and unrest and an economic slump? so far they have done it. i'm relatively confident they will continue to do it, and i think their model is different from ours. it is difficult to say -- they won't do at the same way as it would be done in the u.s. or europe, but they know exactly what they have to do to manage the recycling of capital efficiently, but they can do it. francine: do you think investors are underestimating the perils of bank qualities in china? >> the value of an asset simply put depends on the cash flow the asset can generate. that, more than anything, in many economies, depends on successful economic policy and
no known disruption to that. if you suddenly have an economic event like these closing of shale gas in america that disrupts the market, or the decision in germany to move away from nuclear power, you have a disruption to people's expectations of the future. if you don't have disruption, then asset values should be broadly around what people expect them to be. so it's those disrupting events which are more about political that economic events that are unpredictable. francine: the chinese trinity of the reserves, currency, and outflows. it clearly is a complex equation. net exporter of capital, which is really important for the rest of the world and for the diversification of the chinese savings goal. clearly they want to manage it where severe volatility
in the currency makes people nervous about their ability to control things. they have a combination of market tools and regulatory tools and so on to do that. i think again from my side, we tend to extrapolate single fund movements more dramatically than they would internally. but you are absolutely right, it's a challenge to manage all these things. china is becoming one of the major investors in the world, and that's a very positive thing for globalization. francine: china is offering restrictions for pulling out of the country. is that impacting your growth strategy or is it impacting your ability to grow? way our big investor in china. francine: you are hiring in
china? how many? >> over the next several years we will be hiring a few thousand ourle to balance out investment strategy. the rate of development depends on the economy and a number of other factors, but we are very positive about what we can do in southern china. there's a huge group of in honge speakers based kong. there's a great opportunity to maximize the economic value of that region. anna: you can catch the full exclusive interview with douglas flat starting friday at 8:00 p.m. london time and on sunday at 5:00 p.m. as well. a lot more to come from that conversation throughout the day here on bloomberg television. still with us in the studio is david stubbs.
we heard douglas went there talking about the transition that is underway over in china. incoming u.s.he administration in china, we don't know the details but the rhetoric suggests it's ever increasingly important. david: i think china has seen the writing on the wall about this for the last few years, not just for the political atmosphere but for consumers across the western world. they saw benefits of pivoting away toward more domestic sources of growth and they are starting to do that. from industryy and manufacturing, industrial production and consumption. the interesting thing about the chinese stock market is the transition is already happening. software is at 32%. three years ago it was only 9%.
you're already buying more new china vanke old china. , china in many ways is a microcosm of the way that emerging market equities have changed in the last few years. this is much more of a tech the mastech play that it was four or techyears ago -- of a domestic play than it was four or five years ago. it's a different animal than what it was five years ago. anna: how concerned are you about the way china can rear its head and destabilize global markets? have quite us -- in their piggy bank to play with in terms of supporting the currency. can is something that destabilize markets. you talked about the concerns
you have going into next year about the u.s. housing market. others are concerned about chinese debt and that's becoming a big topic. david: there are two big things with china, one is their movements in the currency. why the most positive things to happen in the markets in the last 12 months is that people have learned not to care about what's going on with the chinese currency. it falls and rises. markets don't need to worry anymore. i hope the new u.s. administration will put an end to that. it has fallen away at last 12 month and that is a very positive ink. in the background, people are constantly talking about the debt. it's a very domestic issue. china isoing on in building toward some sort of crisis in a few years time. they are increasing debt at a very asked pace and the funding side of that, it's where they
get the money, the liability. the liabilities are increasing in very complex and opaque ways. but years from now if it keeps going it could be a problem. anna: let's turn to japan. be inarts of it seemed to line with estimates but a little bit of a resurgence around bigger manufacturers. the moves in the yen against the dollar. manufacturers are focused on exports and therefore they care very much about the currency. the stock market moves with it. we think the currency is going weaker. at a time when the u.s. yield curve is rising. that is the tactical story. the structural story is
completely different. it has nothing to do with the interest rates and everything to do with the changing corporate culture in japan. and you see success there, because lots of investors speak skeptically about where is the other arrow, it is missing in action. are you really confident that problems like immigration and all thatthe workplace, will be able to be delivered? find faultcan always with any reform program. immigration is the key missing part of what we have had so far. is stillployment rising. under the surface, the japanese economy is very strong. has the high r&b spend, and this is an issue about
measurement as well. gross domestic income has been going up 1.6% year on year for the last few years. that is why unemployment is so low. issue fork at the big the last 10 or 15 years, it is japanese government debt. bloomberg, gdpur japan -- gdp in japan has stabilized over the last couple of years. they haven't done the latest tax hike because they don't need the money. that is a sign of the underlying sense of the economy. who holds it matters. david: it's almost all domestic. hugeank of japan owns a huge
chunk of it now. this is not worked out for any investor. i don't think it is a major issue for the foreign investor. those looking for genuine economic transformation can always find it. numbers are expecting out from the retail sector today and will get further details of the retail story. dara. sales advancing at some may be skeptical about the potential for online sales in the clothing industry, then invested large amounts in it. david: both the retailers and consumers have to get their head around this. everyone wants to go and try things on and hang them up.
the shoeshine person is the only person who comes to me. shoppingof working in do take a little bit of time to permeate through the retail landscape. you're starting to see a generation of shoppers that is not just happy shopping online and from there smartphone while they're doing five other things at the same time. anna: there are interesting developments ahead for retailers. collapsing commodity prices, week financial systems, those things are gradually going away. what is not going away is the competitive pressures up globalization. the demographic set of gun interest rates down over the last 20 or 30 years, it's not just about central banks or the recession. it's about structural changes in the economy.
that's why i don't buy this enormous bear market in treasuries that will cause a huge rise in yields and disrupt the economy. the 10 year fell the entire time. that was called greenspan's conundrum. where are about to get the conundrum again. anna: thank you very much for your thoughts, david stubbs from j.p. morgan asset management. coming up, powering down and heating up. we talked to one man who's betting on icelandic hot springs as a cleaner alternative. better late than never. the fed is expected to deliver its first rate hike of the year today. investors ask what is the plan for 2017? we put that question to the hsbc chairman douglas flint in our
anna: welcome back. this is a live shot of new york. it's 1:53 in the morning. futures flat at the start of trade. later in the day we will see what happens when we hear from janet yellen and her team at the at omc let's talk about clean energy, and the u.k. is phasing out coal-fired power stations. -- seeking backing from teresa gate -- theresa may's government to build a 1000 mile long undersea cable that
would provide the u.k. with power from iceland. that speak to him now. onused to advise the mayor private equity -- pigeons and has a private equity background. let's talk about this super cable, it would be the longest in the world. it sounds exciting, but what is it about? >> it's about taking unlimited amounts of geothermal and hydropower from iceland, under the sea and bringing it into the north of england where were also looking to build a cable factory. that would provide about the same as a small nuclear power station. complementsthat wind and other types of power that tend to fluctuate if the wind lows to strongly are doesn't blow it all. so we are replacing the nuclear power station.
energy minister ask if we could have four of them. we said let's get one going first. but it is quite an undertaking. anna: why not go to scotland, the cable would be shorter that way. >> the geography. the first is the lack of onshore capacity in scotland. they'll need any more cables going in behind it. secondly the international sovereign wealth fund investors are looking to be major financers of this. they are concerned about political risk. they are looking 30 or 40 years out, and clearly there are lots of from wings in scotland that over 30 years is not a risk they want to take. anna: brexit of course is also a political risk, if you could put it that way. i know you were in favor of the brexit vote and you have seen thanks go your way.
you have also been a donor to the conservative party. are you happy with where things are going? >> yes, i am. i went to a drinks party a couple of nights ago and i'm convinced that teresa has got her mind set on brexit, so that's obviously a very important thing. she's brought in some very competent people to drive that through, and they are very determined to drive that through. the party seems to have fallen in line behind the new prime minister, which is obviously a very important thing. anna: i know the decision between a hard or clean brexit and a soft and transitional one, do you think we are on the bright -- on the right path? >> i don't recognize those terms. you either have a brexit are you don't have a brexit. the and soft are the terms remainders are using.
anna: asian stocks holding steady as janet yellen points to deliver the high cost of the year. . return to the forecast risk in regulation. in an exclusive interview, hsbc's chairman says he does not see president elect donald trump rolling back regulation. >> our biggest risk is our industry. you do not want a part of the world where people are able to do things with much less [inaudible] as is economically advisable. we are all exposed to each other. light touch regulation, if you can have the firmest standards.
large andiment among you fractures improves since june last year. what does the positive momentum in ford boj stimulus? johnson & johnson and's discussion for a potential deal leaving the door open for another bidder. they are now in talks. a warm welcome to "bloomberg daybreak europe." let's go first to the german retail sector. numbers coming through from metro. this business based in dusseldorf in germany reporting their numbers for the last quarter and also giving an update on their guidance. they are saying they see 2016-2017 earnings before
interest and tax in some items slightly above the prior year. it seems to be in line with what they previously told us which -items would pre exceed one point 5 billion euros. we are getting a slight update. proposing a dividend of one euro per ordinary share and they are giving us their full-year net income for special items at 639 million euros. eps at 1.96 a share. and two under line that comment on the slightly better ebit., they are seeing a slight rise in overall group sales. this company that plans to split the company into next year, one part of the business will continue its media mark and saturn electronics store will be the cash and carry and reelfoot businesses. more details to come through and a strategy update which is
expected to take lace neither company headquarters tomorrow. some details coming through on some stories in china. bringing those to you. we have got some details coming through on china's yuan loan. in november in china we saw new yuan loans at 794.6 billion yuan. there was an estimate out there from economists that the number would be 720 billion. that seems to be more yuan loans in november than was estimated. we are also getting aggregate financing numbers. yuan against an 1000 100 billion. that is above the estimates. cross-border settlement coming here, lots of details coming through on the china story. we will throughout the risk radar and see where we are on -- in various markets overnight. you can have a look at that. we are getting some msci
asia-pacific flat. oil 52ce of a barrel of 52 point 47. we are flat on the dollar against many things. the and in particular, we had thesurvey out better than large manufacturing side of things in japan but we are on the said day so things are in limbo and 2.45% is the u.s. 10 year yield there. we have the bonds board, we can put that up for you and show you where we are on various bond markets. 2.45% in the u.s. on this fed day. we'll talk more about that. just to backtrack slightly. i should have told you about car phone has said. they have given an update to the market. they are optimistic about the
ability to gain market share. this is according to the ceo and they are reporting a strategic partnership with sse, and the utility space in the u.k. let's get the bloomberg first word news for you now. goldman sachs plans to appoint harvey schwartz and david solomon to succeed president gary cohen who is leaving -- leaving the bank to take a job in the trumpet ministration according to the wall street journal. setting people it did not identify, goldman is likely to name martin chev is to replace schwartz as chief financial officer. jeffrey gundlach has said interest rates may climb to 3% on 10 year treasuries by next year. markets.at would have he called the policies bond unfriendly and said the effects
would be felt across the u.s. economy. benchmark treasuries are trading at close to 2.5%. confidence among japan's large manufacturers improved for the first time since june last year. that is as the weaker yen and prove prospects for company earnings. sentiment in the boj rose from six to 10. with the outlook up to date from six. a 5.5% increase in land business investment for the current fiscal year was below estimates. 7:06 a.m. here in london. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . saly has details. what is moving the markets? juliette: what has been interesting is the shanghai composite which was fluctuating all day has just closed in the red down by .501%.
it was doing ok. november supply numbers coming through and the new loans. they were better than expected or mostly in line. it can have into much of that but we have been seeing a lot of week is coming through these markets this week. a lot of concern about the equity market and of elements stocks coming under pressure. the hong kong market fearing a lot better, up i .3 of 1%. -- by .3 of 1%. hong kong survey in japan was better than expected as well. the nikkei closed flat today. we did see the topics eased slightly back. holding that six-day run we have indexon the topix elsewhere. also worth watching, the bond market. we have had the yucca pretty flat on japan. this is as the boj boosted its bond purchase but we saw a
little bit of a retreat coming through in the yield on the 10 year. australian note down three basis points, two point 79% and similarly in south korea. as you would expect, we are seeing bonds in a pretty narrow range trade ahead of the fed decision, very much likely priced in and the dollar holding fairly steady as well. not much movement coming through in these asian currencies. the aussie still unable to push through that 75 u.s. sent level and looking at the end, it is pretty flat against the dollar as well. -- 115.14. sinceit has been 12 month the federal reserve began lift off. there has been a lot of talk about but no action. releases have been topping estimates at the fastest pace in two years. measures of inflation arcola sing around 2% while employment figures are trending higher. speaking to bloomberg, alan greenspan said the unemployment rate cannot fall much lower.
the labor force is running out of extra workers. the unemployment rate is under 5%. you cannot go very much lower toch means that the 150 200,000 increase in payrolls a month is not going to continue on because we're running out of people. anna: the outlook for fiscal policy remains in question. francine lacqua spoke with douglas flynn and got his view on the impact of stimulus in the united states. mr. flynn: they were those -- there are those that argue inflation would be a good thing. that should mean the interest rates should began to rise and again, there are many who think that it is time that zeroest rates rose because or new zero rates are very
difficult from a policy perspective because there is not some at flexibility. you begin to get more of a risk curve again and the savers begin to see some reward for their savings. you can argue both sides and economists do. anna: let's talk about the u.s. economy, fiscal and monetary coming together. pete nelson at ubs, good morning. when we sit and look at what has been happening to u.s. equity markets among arguably but since the election of donald trump but something seems to have that a fire under them toward the end of the year. we see the dow at the levels we saw yesterday. within a whisker of these crucial landmark levels. how excited are you about u.s. equities, the end of this unit and next? guest: there has been a review for trump has been positive reflation. the bond markets have moved even more. we have seen huge inflows of you look at the equity etf's into
the u.s., we have seen tens of billions of dollars common post data election. we have just started to see money coming in. u.s. investors were sellers [indiscernible] peopled expect like most that the fed was not tightening rates again today. and we will get two more hikes next year. we are -- there is a tentative increase in braids. what mr. trump means to fiscal i'll see, the jury is out but there is a potential for some fiscal reflation. anna: with the unknowns around donald trump in the mix, the expectations from the members of the fomc about where rates will be next year out into the future. what kind of moves do you think we are likely to see on the dot plots? it does seem to be a focus for investors heading into this meeting.
what kind of moves will they give us when there is too much uncertainty about donald trump? they cannot move on expectations on inflation. there may be the risk with a little more. you only need two or three members to move and the average. and medium. moves as well as that changes the policy. as you rightly say, the inauguration in january 20, nothing has actually happened. the hard data is what they need to look let -- look at. maybe there will be inflation expectations, that is the one thing that really moved. if you look at the inflation expectations, those have jumped. they were rising already but they jumped up postelection so they could make a commentary around that. as you say, we do not know what the fiscal policy will be. we do not know much that will go through and we do not know the effect on the economy yet. anna: what kind of effects will the higher interest rates have? we have the u.s. 10 year at
2.445%. worried about 3% on the tenure because he is worried about what does to junk bonds and the overall economy and equity markets. do you think 3%, does that, what impact does that half, does that slow the economy significantly question market is not high by historical standards, is it? that matters is what level they are starting from and if they are rising. that is ok for equities and if they are rising at the speed they have ripped does reason in the last week sick and be troubling. the level is still relatively low. for equities i do not think it is yet a problem at 2.5%. as you get two or 3% and above, maybe. there are these aid back loops into the economy, stabilizing
measures. u.s. mortgages tend to be along the end of the curve and the cost of those mortgages to u.s. consumers has gone up in the last month or so. that will perform some modest drag on the economy. anna: even away from trump because we do not know the details of his policies, i have this chart here which is around the inflation seen. this is inflation but away from the trump story. this chart.n find this shows china ppi on the rise. a quite seismic shift we have seen in china ppi. we have rent crude leading higher. and analyst said 2016 could be the year that we rubber as when we saw an end to the deflationary impulse being passed around the economy. what are your expectations round inflation and how do you invest around that scene? what: the key thing you have got there is energy. if you look at the fallen energy we saw at the last two years, it
was a double ace affect -- base effect. we are up [indiscernible] are going to have this huge inflation coming through in q1 because of energy and immune -- and if you look at thed we have had a one percentage point drag from energy to the headline inflation over the last year or so and that will fade and it will fade and restart -- start to reverse. inflation will come back with inflation in the eurozone class -- close to 1%. we need a little bit of topline growth. we are bullish on the energy sector. it is one of our key overweight and that is partly because he will see this strong earnings growth extra because of base effects but also dividend yields. you have a 6% dividend yield for this year for energy in europe. that is the highest of any of the sectors, it is overtaking the banks because the banks have rallied so yields is come down.
you look at energy as your biggest yielding sector with some decent earnings growth in 2017. anna: one of the things in the chart was the oil price and the other was the chinese story. we have the news about credit expansion in the chinese economy. the broadest member -- measure of new lending rebounding as the government pumped more credit into the financial system to support the economy. rebounding, if the economy trends to slow below 6.5%, the chinese authorities will bring it and let more money in. nick: if you think back to the beginning of this year, back to january and february, february completee market low, concern over chinese hard landing, chinese banks, all these concerns and concern over the u.s. slowdown and recession. a lot has changed in 11 months and what happened is the chinese responded aggressively and
opened the spigots and put on liquidity and sold property, liquidity exposed markets and industries booming in the second quarter. they had to close it down a little bit. i think they are finessing these quarterly moves in gdp and you are right, as you get to lower levels, they can increase liquidity and he can increase liquidity into the economy and things like property. anna: thank you. more thoughts from nick nelson when we come back on " bloomberg daybreak europe." up next, happy new year. hear what hsbc's douglas flint sees in store for the economy. more from our exclusive interview with him. this is bloomberg. ♪
low growth, it broken banking system. the essential point is that 80% of lending comes by banks. a complete inverse to the u.s. there is some real sense of resolve to go early in italy to solve the banking issues. the president of morgan stanley speaking with bloomberg about europe. let's get to the bloomberg business flash. chelon was offered 27 -- 27i billion dollars. sanofi. in talks with the move sets up a potential bidding war. shares soared in sydney trading
after the opening. does fargo has failed to for the second time to persuade regulators that it could unwind its business without wreaking havoc on the broader financial system. the lender is banned from buying non-bank companies are setting up international units. if wells fargo does not come up with an acceptable so-called living will buy april, assets in broker area will be cap. anna: let's talk about the outlook for next year. chairman of hsbc asking him what he expects to see in 2017. respects is good for banking business in the sense that people think carefully about what they need to hedge and how they should position themselves and what kind of contingency facilities they need badon the other hand, it is
for economics to the extent it slows down people making holdingnt decisions and back on strategic options because they do not quite know what will happen next. anna: let's get back to nick nelson, still with us here in the studio. we talked about your picks about the things you like, energy, for example. i'm drawn to one of the statements in your report. 2017 will be the first copper year for european etf's -- proper year for european etf's. nick: if you look at the last six years the bottom up consensus numbers, earnings growth started at eight to 15% and every year finishes at zero or negative. the average downgrade was 12 percentage points. if you look at that consensus are up atr 2017, they 13%. the average downgrade has been 12% so if you extrapolate that suggests nothing again but we think you will get honest growth. returns and the
stock space rub up against the reflation story we have been talking about in the bond markets? you are noting the link between, the concerns about two little inflation previously in equity markets. you: if you look at europe and japan, these are countries that could do with more inflation. lationok at the trumpf story that may help with the domestic economy. japan nikkei would be bigger beneficiaries and that would help earnings growth. anna: europe big beneficiaries of global trade? the dax.many, second language may not be so positive if we have a less free-trade view coming through which we do not know. we have not seen the agreements, we do not know will come through. if that is a globalization that would be a negative for emerging
markets in particular who are more dependent on trade in europe but europe as well, exactly. and at: you like energy and autos and construction. where do you like autos and construction? nick: it is a play on fiscal expenditures and maybe it is discussed in the u.s., maybe in europe. you see this move toward populism, maybe government is giving these elections we have in the next nine months in europe and all the big economies create you might see government have $2.7nd we trillion of interest trucks are going on in asia. companies that benefit from that could do quite well. when we look at autos, this is the opposite of a cyclical sector. we are thinking autos manned in europe has been strong and the -- in europe. anna: what about the u.k. space navigating brexit? inflation pressure is holding.
and underlying the pressures building from the oil price and the input prices story in the u.k. this could be something that undermines investment in u.k. corporate or not? at the ftse look 100, 75% of the revenues are from under -- overseas. cpi in the u.k., over 1.2% but the input prices are running and the double digits, 12% are 13%, and those are coming down the track and our concern is this puts pressure on you wages for the consumer when we go into 2017 so that would be a drag on domestic stories. anna: thanks for joining us, good to talk to you this morning. next nelson at ubs. still the come. over the weekend, you can catch the exclusive interview, france lacqua's a -- francine 2:30 p.m. and on
you can handle being a mom for half an hour. i'm in all the way. is that understood? i don't know what she's up to, but it's not good. can't the world be my noodles and butter? get your mind out of the gutter. mornings are for coffee and contemplation. that was a really profound observation. you got a mean case of the detox blues. don't start a war you know you're going to lose.
finally you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. guy: good morning. welcome to bloomberg markets the european open. i am guy johnson alongside matt miller who is in berlin this morning. what are we watching? take a hike. the market is ready for the fed to raise rates but what will the fomc deliver in 2017, that is the big weston. we will hear from three former central bankers, alan greenspan, philip hildebrandt, jean-claude trichet a all coming up. presidential pain. can your treasuries talking